Understanding the Lifetime Learning Tax Credit
Being a lifetime learner is a goal of many individuals. Now, the federal government is committed to your desire to learn throughout your lifetime. How can the government support your educational goals? Well, there are tax breaks available to you as you pursue higher education. The Lifetime Learning Credit provides a tax break for some of your expenses associated with pursuing higher education. There are certain qualifications for the taxpayer and certain limitations on the amounts you can claim. To learn more and see if you qualify for these tax breaks, keep reading!
What Exactly Is the Lifetime Learning Credit?
So, what exactly is the Lifetime Learning Credit? The Lifetime Learning credit is a tax credit available to individuals who file a tax return and owe taxes. The amount of the credit is subtracted from the taxes you owe. So, you have to actually owe taxes to benefit. Taxpayers who owe less tax than the maximum amount of the Lifetime Learning tax credit for which they are eligible can only take a credit up to the amount of taxes owed.
How Much Can I Claim?
It would be ideal if you could claim every single expense associated with your education. However, there are certain limitations. A family may claim a tax credit of up to $2,000 per tax year for the taxpayer, taxpayer's spouse, or any eligible dependents for an unlimited number of tax years. The amount of the Lifetime Learning tax credit is 20% of the first $10,000 of qualified educational expenses paid for all eligible students. Therefore, the maximum amount of a Lifetime Learning tax credit you may claim every year is $2,000. The Lifetime Learning credit is available for all years of postsecondary education. It’s also available to cover courses to acquire new or even improve your job skills.
How Do I Qualify for the Lifetime Learning Credit?
So, now you’re wondering if you qualify. Again, you have to actually owe taxes to get the credit. The taxpayer must also claim the eligible student as a dependent. And, you cannot claim a Lifetime Learning credit if your Modified Adjusted Gross Income (MAGI) is $55,000 or more if you’re single, or $110,000 or more for married couples who file a joint return.
An eligible student may be enrolled in an eligible program leading to an undergraduate or graduate degree at an eligible school during the calendar year that you’re filing taxes. Students may claim the credit themselves if they are not claimed as a dependent by another taxpayer.
How Do I Claim the Lifetime Learning Credit?
Now that you know what the Lifetime Learning Credit is and you’ve determined you’re eligible, how do you claim it? To apply for the credit, the taxpayer must report the amount of tuition and fees paid as well as the amount of certain scholarships, grants, and untaxed income used to pay the tuition and fees. Your school will send you and the IRS a 1098-T with important financial information. Use this form when filling out form 8863 to claim the credit. A taxpayer may wish to talk to a tax advisor for help in calculating the amount of its credit.